Budget: Reforms for energy, small business

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A new gas exploration program and improvements for small businesses are among Budget measures of note for the bulk handling sector this week.

Federal Treasurer Scott Morrison announced the Budget in Canberra on Tuesday night.

He announced the government would extend – to June 30, 2018 – a measure which allows businesses with a turnover of less than $10 million, to immediately write-off new assets of up to $20,000 in value.

The measure is forecast to cost $950 million this year, with $300 million of that set to be recouped in future Budget years as a result.

Small business minister Michael McCormack said the decision was made to create jobs.

“I have heard firsthand how helpful the instant asset write-off is for many small businesses to invest in the capital equipment they need to grow,” McCormack said.

“I have heard how it helps small businesses invest in their business and replace or upgrade their assets.”

The move was welcomed by National Farmers’ Federation president Fiona Simson, saying “accelerated depreciation” helped farmers invest for the future.

Simson urged the Government to extend the measure beyond June 30 next year, however.

“It is disappointing,” she said, “that farmers do not have the certainty of a long-term asset write-off arrangement – with the extension limited to a further 12 months.”

East Coast gas investment

Morrison announced a $28.7 million investment in a new East Coast gas development program, aimed at the development of gas resources, to ensure affordable and reliable energy supply for industry and citizens.

Resources and Northern Australia minister Matt Canavan said the program would target faster development of onshore gas fields.

This is at odds with state policy in several places, however: Victoria has a ban on exploration, the Northern Territory has a moratorium in place, and New South Wales has also limited new developments.

But Canavan says more exploration is needed to secure enough gas for Australians.

“This new program will support projects that provide gas to domestic users and activities that accelerate gas supply from significant resources,” he said.

“Funding will be subject to the removal of regulatory restrictions, like moratoria on onshore conventional gas developments.

“Victoria has a blanket ban in place and the Northern Territory has a moratorium in place that are preventing any onshore gas development, despite preliminary assessments that both regions have substantial gas reserves.”

The news was welcomed by the Australian Petroleum Production & Exploration Association.

APPEA chief executive Dr Malcolm Roberts said the funding addressed the “pressing need” for more investment to expand supply.

“While the gas market has tightened, putting pressure on local industry and families, States have allowed rising regulatory costs and restrictions to stifle development,” Roberts said.

“Exploration has slumped to its lowest level in thirty years.”

Low forecast for iron ore

A strong rise in non-rural commodity prices late last year are set to grow nominal GDP by 6% in FY17, but softer growth is forecast over the next two financial periods.

The Budget forecasts an average iron ore price of US$66 a tonne for the rest of 2017, lowering to US$55 by March 2018.

Metallurgical coal prices are set to drop from US$200 per tonne in the first half of FY17, to US$120 a tonne by March 2018.

“The prices of some of Australia’s major commodity exports rose sharply over the past six months and are providing a temporary boost to national income,” Treasury wrote in the Budget papers.

“Higher commodity prices are expected to lead to a near-term improvement in the trade balance, [but] it is prudent to assume that prices for metallurgical coal and iron ore will not be sustained at recent levels.”